5 Potential Pitfalls in a Bulk Real Estate Package

by | BiggerPockets.com

It seems like small bulk deals are becoming more popular these days (bulk meaning somewhere between 10-50 properties). With the market on its way up, there are a number of investors out there who see this as an opportunity to unload a lot of properties at one time and turn a quick buck.  I think there were a handful of investors who had the foresight to accumulate properties when the market was at its lowest knowing they’d be able to sell as a package of properties at a higher price point at some time in the future. (Granted, I’m not sure anybody realized how quick the demand for property would ramp up)

Regardless of how these packages were put together, there definitely does seem to be a good number of these deals floating around right now.  That said, out of all of the bulk deals I’ve looked at over the last year or so, I’ve only seen one that I had any interest in purchasing.  Why? Because almost every bulk deal is either priced too high or sprinkled with too many junk houses to make for a good investment.

5 Potential Pitfalls

Here are a five common pitfalls I’ve found with these small bulk packages and why it’s very important to analyze a deal closely before committing to something:

1. Properties Priced Too High –  This is probably the most common problem with deals I’ve seen lately. Perhaps the assumption is that because this is an efficient way for a large buyer to acquire a lot of properties at one time, there can be a premium charged for this. Whatever the reason, most bulk deals I see get deleted fairly quickly at an initial glance of the pricing.

2. ROI isn’t calculated correctly – Many bulk deals show CAP rates or ROI’s that don’t take into account all of the numbers.  Some of the most common omissions include vacancy factors, maintenance factors or even property management.  It’s critical that any investor use their own proforma when conducting due diligence on a package of homes.

3. Properties advertised as turn-key but in need of repair – Anybody can say that a property is turn-key, but what does that really mean?  If it simply means the property was rehabbed just enough to get a tenant into the property,  it may not be as turn-key as you think.  Some sellers think that a fresh coat of paint constitutes a rehabbed property, but most investors know better.  If you’re considering a package of properties, it’s important to also factor in immediate repairs as well as deferred maintenance that will be required.

4. Junk Properties Included –  Because I know my market very well, I can usually glance at a package and tell you whether or not there are bad properties sprinkled into the package based on zip code.  Other times, you’ll find that there are properties that didn’t stand alone very well and were tucked inside a bulk deal as a means to unload them.   Whatever the case, it’s important to vet each individual property to make sure the “bad ones” you inherit don’t sink the package as a whole.

5. Properties advertised as rented –  If I’m an investor whose endgame is to get my package of properties rented and sold as quickly as possible,  what are the chances the tenants are screened satisfactorily?  Maybe they are, maybe they aren’t … but it’s important to get as much information as to the current status of the rents.  Also, I’m looking at a package right now that is advertised as fully rented, but come to find out, some of the tenants have just moved out.  Bottom line is it’s important to know the true rental status of each property before calculating your numbers.

Just as you would do your due diligence on a single property, the same kind of care and consideration needs to be taken when vetting a package of homes. Don’t let an artificially high CAP rate or “turn-key” package of homes entice you into something that doesn’t make sense … always do your due diligence first!

Photo: joiseyshowaa

About Author

Ken Corsini

Ken Corsini G+ is the host of the Deal Farm Podcast (on iTunes) and has 10 years of full-time real estate investing experience. His company, Georgia Residential Partners buys and sells an average of 100 deals per year and has helped hundreds of investors around the country make great investments in the Atlanta market. Ken has a business degree from the University of Georgia and a Master Degree in Building Construction from Georgia Tech. He currently resides in Woodstock, Georgia with his wife and 3 children.


  1. You did a great job of explaining the ins and outs of bulk real estate packages. Folks need to do their own due diligence and run the numbers carefully when looking at these types of deals. There are still deals out there to be found I’m sure.


  2. James Colley

    I have been trying to analyze a bulk package now for two months and have wasted so much time falling into the marketing plows of the gurus or marketers trying to reel me in souly to become their downline. In the meantime the market in this location has increased 9% but certain areas have decreased -12%. I’m at the beginners stage of now catching on that my approach to Acquisitioning this package would be to raise private capital verses funding via hard money lenders. I’m confident with my total net annual return calculation of $428,888 based on 3 years of sellers p&l reports and rent rolls. Gross total is $564,000, so I’m including my 5% maintenance and 5% vacancy, annual placement at $15,667. Property Management will be provided by my LLC and I know it’s low at $4,700 monthly but hey, I’ve been paid a lot lower for managing ten times the amount of units. My net figure is deducting for property taxes and insurance as well so you know.
    So in taking my NOI of $428,888, in 5 years will total $2,144,440, at which point I finally reach a gain of $244,440 and be able to pay back my investors. This is only a test at of 12.87% ROI with a simple annual ROI of 2.57%. figuring at 8 years my numbers show a total ROI of 80%, simple annual ROI 10.07% and compound ROI 7.67%. as a newbie I don’t know if this is anywhere close to where I need to be at with my initial 1.9mil investment. At these numbers how many years I’m I gonna have to work for $56,400 a year till I can provide my investors a decent ROI and give myself a raise? Any friendly advice to help out a newbie without reeling me in a $1500-10,000 mentorship program or webinar leading to such would be greatly appreciated. I’ve even seen some neighboring comp units that haven’t been rehabbed selling up to $80,000 over what I’d be purchasing the house next door for at $20,000. Seen this 3 times now and I’ve seen listing prices on the rise 50%-60% in the same neighborhood over what they were in just the past week. Im afraid I wait to long my package price may change at any moment, and not in my favor. Any ideas?
    Thanks in advance!

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